ICE gas oil has retreated by some $63 per metric ton over the last six days, with further falls likely. This product is now trading just above $950/t for front month quotations, with the possibility of further falls.

European prices for API Group I material have not started to fall, but with added availability of material throughout the region, increases have ground to a halt. The good news for base oil producers is that with lower costs, margins are still relatively attractive, so production will probably continue at current rates.

Prices for Group l solvents neutrals are similar to last week, with light grades between $1305 and $1340/t, and with heavier neutrals SN 500 and SN 600 around $1320 to $1360/t. Bright stock is levied between $1330 and $1385/t, depending on quantity, but prices may increase with expected higher demand due to tenders such as that issued by Egyptian General Petroleum Corp. for its next quarterly supply.

All prices refer to bulk supplies of mainstream production from supply points in Northwest Europe, the Mediterranean, and North Africa.

Baltic & Black Sea
Baltic availabilities of Russian and Belarus SN 150 and SN 500 have diminished slightly over the last few days, with supplies curbed from the large amounts of material offered from this region some three to four weeks ago.

Prices have fallen below $1300/t basis FOB for the two main grades, with some smaller quantities of SN 900 offered around $1345/t on an FOB basis.

Black Sea buyers continue to shun the market, saying they have sufficient stocks at the moment, and they are not enticed by the numbers offered for Russian and Uzbek base oils.

Middle East
The Middle East Gulf is reported as stable, with good availabilities of all types of base oil. Far East suppliers experiencing a rather lackluster market have been encouraged to try to offload parcels of Group I and Group II grades into the Middle East Gulf markets. This keeps the arbitrage from Europe firmly closed at this time.

Prices within UAE for Iranian Group I remain at $1225 to $1235/t for quantities of SN 150 and SN 500, with SN 650 available on an FOB basis out of BIK at around $1175/t. Whether these prices can be sustained is in doubt, due to the lack of demand for Iranian material in the region, and the influx of base oils from Far East sources.

After pressure from the U.S. India has declared it will cut back on imports of Iranian petroleum products by some 20 percent over the next few months. This may have an effect on Iranian exports of base oils into the Indian market, although at this stage it is unclear whether these will be included in the quotas.

Africa
East African receivers expect base oil prices to at least stabilize and perhaps start to fall back. Buyers in Tanzania and Kenya are putting their regular purchasing on hold for a few weeks until they can establish what is happening in the market. One source commented that when comparing offers for Group I material from UAE with an offer from a regular supplier based in Europe, there was a variation in price of some $120/t, the European offer being the higher.

East African prices are around $1400 to $1475/t for both bulk and containerized supplies of Group I base oils, with small quantities of bright at $1550 to $1575/t, all on basis of CFR or CIF deliveries.

West African sources have embarked on large replenishment programs for some areas which are very low on stocks of base oils, both in distributors tanks at the ports and also at the local blending plants. Traders are looking to negotiate prices for imports which they say will be affordable within the local finished lubricant markets. Prices in excess of $1500/t for quantities of Group I solvent neutrals are not feasible, but with the possible drift in European prices, receivers are expecting to have cargoes on the water within a matter of weeks.

Target prices for West African buyers for Group I neutrals are $1350 to $1380/t, with quantities of heavier neutrals such as SN 900 around $1400/t. Bright stock is below SN 500 imports, around $1360/t, but with European demand for this grade being taken up by large buyers such as the Egyptian market, these price objectives may not be achievable.

Group II/III
Group II imports in Europe are in the same ranges as last week, at $1360 to $1400/t for lighter vis grades, with heavier material between $1430 and $1495/t, all on basis of ex tank sales.

In the Middle East availability of Group II grades is increasing. Prices are more competitive than Europe, with the light grades such as 150N around $1275 to $1315/t, and material such as 500N between $1360 and $1385/t, all basis CIF/CFR UAE ports. Where deliveries of these grades are made further into the Middle East Gulf, freight differentials should be added to the above.

Group III ingress to Europe continues from sources in the Middle East Gulf, but domestic producers are still able hold their own against the increase in availabilities. Prices have remained firm, and some importers are sold out.

Group III prices are between 1435 and 1495/t for the 4 centiStoke grades, with 6 cSt material between 1480 and 1510/t. All prices for Group III grades refer to ex tank sales from either Northwest Europe or Mediterranean storage.

Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in East Grinstead, U.K. Contact him directly at pumacrown@email.com.